Eva Dion's 62nd birthday meant one thing to her husband, Jim. It was time for her to collect Social Security. "I'm from the old school," Jim, 74, said. "Grab the money while you can."
Yet before Eva made her decision, she mulled it over with her financial advisor, Carolyn McClanahan, the founder of Life Planning Partners in Jacksonville, Florida. McClanahan, a certified financial planner, plugged all of Eva's details into a software program called SSanalyzer, which runs thousands of claiming strategies and spits out the best options.
The findings didn't match up with Jim. Eva would be best off waiting until 70 to collect her Social Security, because her benefit would be much larger. Her health was good, and many years were likely ahead of her.
Ultimately, Eva held back, though McClanahan had to often remind her and Jim that their patience would pay off.
"Every six months Jim said, 'I really think Eva should be claiming Social Security,'" McClanahan said. "It was really a challenge."
When to actually claim Social Security — at the earliest age of 62 to the maximum age of 70 — is a complex issue and a very important conversation for financial advisors to have with their clients.
If one of the main goals of financial advisors is to help their clients make decisions that are more rational than gut-derived, and be wealthier for it, it only makes sense that more planners are offering help with Social Security.
Americans have a lot of anxiety about the social safety net program. A recent government report found the cost of the system will exceed its revenue next year for the first time since 1982. Meanwhile, the reserve fund is projected to run out in 16 years, at which point recipients will see reduced benefits if Congress doesn't step in.
More than 40 percent of people say they worry about the Social Security system a "great deal," according to a recent poll by Gallup. Less than a third of Americans expect Social Security to be a major source of their retirement income.
Emotions aside, Social Security's role in people's retirement is likely to only grow in the coming decades, said Kurt Czarnowski, who worked for the Social Security Administration for more than three decades and now consults advisors on the topic. Already more than 40 percent of single retirees end up with basically just their Social Security to live on.
"The days of that generous defined benefit pension are long gone, " Czarnowski said. "And Social Security is becoming the only guaranteed stream of lifetime income.
"It's vitally important to understand."
Financial advisors are getting that reality, said Dana Anspach, a CFP and the founder and CEO of Sensible Money.
Anspach said she, as well as many other advisors, used to give generic advice about Social Security.
"The general consensus was take it early, you don't know if it's going to be there," she said. "You didn't dig into the nuances."
That's changed. Today Anspach uses a software called Social Security Timing to help her clients make the decision that will generate them the most money.
"You would have to have over $1 million sitting in an investment account to replace what you could get from Social Security," Anspach said. "You don't make a $1 million decision lightly. I'm not a holistic financial planner if I'm not talking about this aspect of a person's assets."
Like McClanahan, Anspach said a lot of the challenge with Social Security planning is getting people to hold off on their monthly payments. She recalled one client who she had to keep showing again and again how much more money he'd receive if he waited until 70.
"I did convince him to wait, and he thanked me later, but at the time he said, 'Everyone tells me I'm a fool. Why don't you start?'" Anspach said.
Delaying Social Security is undeniably one of the best ways for people to increase their retirement income: A person's monthly check will often be three-quarters larger if they claim at 70 instead of at 62, said Laurence Kotlikoff, an economics professor at Boston University. (Kotlikoff also has a Social Security planning software for advisors, called Maximize My Social Security.)
"Nobody on Wall Street would ever leave this opportunity untouched," Kotlikoff said. Still, less than 5% of Americans wait until 70 to file.
Some people — such as those in poor health, for example — shouldn't delay their benefits, and advisors can help their clients make the best decision based on their personal circumstances, said Joe Elsasser, founder and president of Social Security Timing (whose software Anspach uses).
"Most people think it's claim early or claim later, or an individual decision instead of one coordinated across the household," Elsasser said.
The reality, he said, is more complicated. A married couple, for example, could have more than 80 ways to claim their check. His software accounts for Social Security spousal, widow and survivor benefits, he said.
Advisors also need to be able to understand the earnings test with Social Security, said William Meyer, co-founder of SSanalyzer. The government withholds benefits if a person younger than their full retirement age (66, for most people) earns above a certain amount.
Advisors can even help clients who've already filed for Social Security and regret doing so, Meyer said. "What about the millions of people who made a mistake?" he said. People who, say, claimed Social Security at 62 can call the Social Security Administration at their full retirement age and suspend their benefits. For each year that they do so, until 70, they'll see an increase in their check of around 8%.
For clients who are worried about Social Security disappearing, advisors can provide consolation, McClanahan said.
"I tell people, for now, don't worry so far about the future that you can't control," she said. "Count on that if we have a good government, we're going to figure out how to keep people from living in poverty when they age."
Today Eva is happy with her decision to claim her Social Security at 70. Her monthly check is $3,227. Had she filed at 62, her benefit would be $1,576. "We wouldn't have the financial security we have now," she said.
That larger check has even brought Jim around. "Its nice to know if we want to see our boy and his children in New Jersey, we don't have to worry about a flight ticket," he said. "We can do it without hurting."